Datawise, there is very little of note expected out on these shores today. The electioneering will continue to gather pace and the markets will continue to keep an eye on the polls, but there is nothing from a markets perspective that is likely to change sterling's fortunes, so I would expect another day in the current high 1.40s range. From yesterday, the better than expected services PMI (58.9 vs 57.0 expected) did little for sterling, with US Dollar buyers seeing better levels to buy after the long weekend.
Greek concerns remain the issue on retail sales day
The data from Europe continues to be solid, with services PMIs yesterday all in line with expectations and slightly above 50 – therefore in growth territory. The Europe wide figure was 54.2 against expectations of 54.3. We have a further slew of data this morning, but this time covering retail sales. The expectations for February are for a year on year increase of around 1.9%, though with the December and January figures above 3%, there is the potential to beat expectations.
The concerns in Europe continue to centre around what looks like far more impending squeezes on Greece. Luxembourg central bank governor Mersch made comments yesterday in the press on the worsening Greek economy and mentioned capital controls which have up to now been strongly denied. There is an imminent payment of EUR450m due to the IMF this Thursday, and a further EUR1.4bn due to refinance before the end of the month. The negotiations continue but the clock is still ticking and markets are unlikely to be very patient.
Speakers and soundbites today from the Fed
The light calendar in the US continues with very little out today except for a couple of speakers and the minutes at the end of the day. Yesterday’s speaker, Kocherlakota, is no longer a voting member, but continued with the dovish tone, suggesting no change is needed for some time, but was a little more positive on the labour market. The two speakers today, Powell and Dudley, are centrist and dovish respectively, so I don’t expect to hear any talking up of rate hike prospects ahead of the release of the minutes later.
In turning to the Fed minutes, it is worth noting the change in composition of the voting members for this year, which by most people’s estimation leaves a move dovish voting group, is less likely to be in a hurry to raise rates. With the removal of ‘patient’ from the minutes, the onus is on the data, which has generally surprised to the downside. The general consensus is that the minutes are likely to be dovish though there may be more information on the expected rate path once they do start to raise, but the question is whether even dovish minutes will halt the continued dollar strength.
